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SL Green Realty Corp. (NYSE: SLG), together with an affiliate of Blackstone Real Estate Partners VII, Gramercy Capital Corp. (NYSE: GKK) and Square Mile Capital Management LLC, today announced the formation of a joint venture for the recapitalization of a 31-property, 4.5-million-square-foot office portfolio in Southern California. Following the recapitalization, Blackstone is now the majority owner of the venture.
The portfolio comprises 59 buildings, located in various submarkets including Los Angeles, Orange County and San Diego. It includes assets such as the LA Corporate Center in Monterey Park, Skyview Center in Los Angeles, 350 South Beverly Drive in Beverly Hills and Carmel Valley Center in San Diego’s Del Mar Heights.
Blackstone has invested approximately $85 million into the portfolio to de-leverage and establish significant leasing and capital reserves. Equity Office Properties, a Blackstone affiliate, will assume full responsibility for the portfolio’s management and leasing, adding to its existing 11.2 million square foot portfolio in Southern California.
SL Green Co-Chief Investment Officer David Schonbraun said, “This recapitalization permits SL Green to retain upside in a portfolio that will enjoy the benefits of professional management, capital for leasing and an improving Southern California office marketplace. In arranging for this new equity structure, we took advantage of our strong reputation as an investor and benefited from our close existing relationships with many of the other parties involved, including Blackstone.”
He continued, “We believe that with the experienced management of Equity Office, a company with years of experience in Southern California, this portfolio is primed for a rebound. The fact that more than a half dozen expert equity and debt investors agree, and have come together to make substantial financial commitments, speaks volumes about their confidence as well. SL Green is now well positioned to recoup its original investment in full, and to benefit from the anticipated upside as well.”